Schedule of Derogations bites: TCC clarifies limits on contractor’s design responsibility

A recent judgment in the Technology and Construction Court (the TCC) has considered the interpretation of contractual clauses in an amended JCT Design & Build Contract 2016 (the Contract) in a dispute over the design risk.

Adrian Williamson KC found substantively in favour of Mace Construct Limited and held that a Schedule of Derogations, which formed part of the contract, qualified Mace Construct's design responsibility such that it would assume no such responsibility for certain listed items until the design solution for each item had been approved and formally instructed by Baltic Investment Holdings. 

Case facts 

The case, Mace Construct Limited v Baltic Investment Holdings Limited [2026] EWHC 976 (TCC), related to the refurbishment of the Baltic Exchange Building at 38 St Mary Axe, London. The contract was based on an amended JCT Design and Build 2016 form, and incorporating various Contract Documents, including a document entitled ‘Derogations Final’, otherwise referred to as the Schedule of Derogations. 

Under these Part 8 proceedings, Mace Construct sought declaratory relief as to the proper construction of the Contract in relation to the Contractual allocation of design responsibility and the effect of the Schedule of Derogations which identified specific elements of the works for which Mace Construct would not accept design responsibility during a period of initial design development. 

Mace Construct sought the following declarations: 

• the Schedule of Derogations was not superseded by the JCT terms and is to be given effect as part of the Contract as a whole;
• at the time of contract, Mace Construct did not assume design responsibility or risks of discrepancies, inconsistencies and inadequacies for the “Derogation Items” listed in the Schedule of Derogations; and
• Mace Construct did not assume such responsibility or risks for those items until such time Baltic approved and instructed the final design solution.

Under the terms of the Contract, as is typical in a design and build contract, Mace Construct had agreed to carry out and complete the design of the Works and was responsible and liable in all respects for the entire design of the Works. 

However, the Schedule of Derogations included the following terms:

“1. Mace Construct Ltd are unable to take design responsibility, associated risk of any discrepancies, inconsistencies and inadequacy of the below listed items until the period of initial design development is complete on the 2nd February 2024, 6 working weeks from anticipated contract execution date (08 December 2023)… 

(a number of items were then listed, with commentary) 

2 Once the derogations listed in this document have been concluded and approval from all parties obtained, and formal instruction received Mace Construct Ltd will take design responsibility on the items listed above. 

Mace Construct Ltd will take design responsibility, excluding planning approval from the 2nd of February 2024, 6 working weeks from anticipated contract execution date (08 December 2023). The Heritage Windows will be completed within 5 weeks due to the criticality of these works.”

Furthermore, an addition to clause 8 in the Schedule of Amendments provided that Mace Construct’s work under the Contract was initially limited to a partial scope, which included the design of the activities described in the “Derogations Programme_V3”, and that until 28 February 2024 it should not proceed with any other part of the works.  

Mace Construct argued that design responsibility only passed to it once the designs for the items in the Schedule of Derogations were concluded and approved and an instruction was received from Baltic. 

On the other hand, Baltic’s position was that Mace Construct accepted design responsibility from 2 February 2024, and that effectively no weight should be placed on the start of paragraph 2 in the Schedule of Derogations, which required the approval and instruction to be given. In support, they relied on the provisions of clause 1.3 (as amended), which was essentially a form of precedence clause for the contract documents:

• i. The Agreement and these Conditions are to be read as a whole.
• ii. Nothing contained in any other Contract Document or any Framework Agreement, irrespective of their terms, shall override or modify the Agreement or these Conditions or the Schedule of Amendments.
• iii. In the event of any discrepancy between (a) the Agreement, the Recitals, the Articles, the Contract Particulars, the Conditions and/or the Schedule and (b) the Schedule of Amendments, then the provisions of the Schedule of Amendments shall prevail.
• iv. In the event of any discrepancy between (a) the Schedule of Derogations and (b) the Employer's Requirements, the Schedule of Derogations shall prevail."

The TCC disagreed, reasoning that (i) there was nothing in the Schedule of Derogations that sought to override or modify the Conditions or the Schedule of Amendments, but rather it explained and supplemented them by clarifying how Mace Construct should perform its design obligations and undertake responsibility in relation to the listed items, (ii) that if there was a discrepancy, then the Schedule of Amendments prevails, and the Schedule of Amendments references the Schedule of Derogations, and (iii) the Schedule of Derogations also prevails over the Employer’s Requirements.   

The TCC noted that it would be an “odd result” if only certain parts of the Schedule of Derogations were given effect to, to the exclusion of the wording which stated “Once the derogations listed in this document have been concluded and approval from all parties obtained, and formal instruction received Mace Construct Ltd will take design responsibility on the items listed above”.

Conclusion

Parallels may be drawn between the judgment in Mace Construct v Baltic and the judgment in Sisk v Capital & Centric [2025] EWHC 594 (TCC), where Sisk were relieved of responsibility for the condition of existing structures on site by virtue of the incorporation of “contract clarifications” as a contract document. For full details of this judgment, please see our review here.
 
Both cases highlight the importance of reading and interpreting contracts as a whole, to avoid ambiguity by including important risk allocation provisions in the contract conditions, and to be as clear as possible if referring to and incorporating clarifications or derogations.